More than 41 million people watched Sunday's Oscars telecast in the US - two million fewer than 2004's ceremony.
The three-hour broadcast averaged 41.5 million viewers, according to data from Nielsen Media Research.
The figures were 5% down from last year's show, when the average viewer tally of 43.5 million ranked as the largest Oscar audience in four years.
Producers had hoped to attract a larger and younger audience by hiring comedian Chris Rock to host the event.
But Sunday's awards registered a 3% decline from last year in ratings for the network's target audience of young adults.
Experts attribute the smaller viewing figures to the fact that best picture winner Million Dollar Baby lacked the popular following of the previous year's victor, Lord of the Rings: The Return of the King.
Mixed reviews
The 1998 show, in which Titanic won 11 awards, remains the highest-rated ceremony in recent history with 55.2 million viewers.
The 2003 ceremony was the lowest-rated with 33 million, partly because it coincided with the start of the war in Iraq.
However, the Oscars are still television's single most watched entertainment broadcast of the year.
In comparison, January's Golden Globe awards averaged 16.8 million viewers, while 18.8 million watched this year's Grammy awards ceremony.
Rock's first stint as Oscars host has received mixed reviews from the critics, many of whom said it had failed to live up to the hype.
Tom Shales of the Washington Post said his performance was "strangely lame and mean-spirited", while the New York Times' reviewer Caryn James said "his few attempts to put his mark on the event fell flat".
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